Transnational Organization - Solution for the Multi National Cooperation?

Essay, 2002

10 Pages


Table of Content

1. Introduction
1.1. Problem Background
1.2. Aim of the paper

2. Analysis of the Transnational Solution
2.1. Lead in
2.2 Worldwide Administrative heritage
2.3 From unidimension to multidimension

3. Discussion of the Transnational Solution
3.1. Theoretic advantages of the Transnational Solution
3.2. Coordination of the transnational firm in practise

4. Conclusion
4.1 Sum up
4.2. Own evaluation of the transnational solution

5. Reference List

1. Introduction

1.1. Problem Background

International companies are confronted with major organizational problems as they often have to manage a complex system of subsidiaries and at the same time need to respond to the demands of economic and political forces.

The organizational structure of companies get more and more complex. In times of falling national growth rates and globalisation[1], many companies expand into new markets. This global expansion trend can be seen by the intensive growth of foreign direct investment outflows in the last ten years.[2] Philips, for example, has build up a huge network of subsidiaries in 60 countries.[3] As companies expand, the flow of goods, resources and information among organizational units rapidly increases[4], and it becomes more and more complicated to manage, control and learn from subsidiaries.

Demands on companies have also changed as “economic and political imperatives are rising simultaneously in opposite directions“[5]. Economic forces lead towards globalisation demanding minimized unit costs while political forces ask for national responsiveness as a result of protectionism for local economies.[6] Today, companies are confronted with the demands of efficiency and responsiveness at the same time.[7]

1.2. Aim of the paper

In the following paper, I will analyse Bartlett and Ghoshals’ transnational solution as a means to cope with the complex organization and conflicting demands on Multinational Cooperation (MNC), and focus my discussion on advantages and problems from a control perspective.

2. Analysis of the Transnational Solution

2.1. Lead in

Bartlett and Ghoshal claim to have found the solutions to the conflicting demands of today’s world. They point out, that problems can be solved by building an organization that works with multiple and flexible mechanisms. To understand the basis of the “transnational solution”, the administrative heritage in the global market place has to be examined. Bartlett and Ghoshal, then combine ideas for coordination and show the need for strategic reorientation that is already recognised by most of the MNCs.

2.2 Worldwide Administrative heritage

International companies differ greatly, and it is therefore not easy to compare them. However, Bartlett and Ghoshal have found major trends in coordination mechanisms and differentiate between backgrounds from the major trading blocks namely Japan, America and Europe.

Traditionally, Japanese companies are coordinated through centralisation, American organizations are guided through formal systems and European companies work with socialization.[8] In Japanese companies “subsidiaries are almost totally dependent on efficient but highly centralized operations”[9] This has major advantages: the system is relatively easy to establish and rapid decision making is possible through minimized arm wrestling of headquarters and subsidiaries. Disadvantages lay in the fact that headquarter are overloaded with information as overseas organizations grow in size and complexity.[10] In contrast to the Japanese, American companies are usually more in fond of delegation of responsibilities to subsidiaries, and this is made possible through sophisticated management systems based on formal rule. Though formalization gives great possibilities for control as standards have to be achieved, the system is problematic since policies and practises vary in different complex and rapidly changing environments. Also, strategies do not differ and give room for imitation.[11] The traditional European solution seams to overcome the centralisation problem of headquarters overload and formalisations inflexibility. The system relies on shared values and objectives and decisions are reached by knowledgeable groups with common goals. The major disadvantage lays in the costs since socialization is the most expensive means of coordination.[12]


[1] Donaldson (2002), p.13.

[2] Hill (2001), p. 183.

[3] Goshal/Bartlett (1990), p. 77 [Art. 22].

[4] Bartlett/Ghoshal (1987). p.47 [Article 12].

[5] Martinez/Jarillo (1989), p. 500 [Article 23].

[6] Hill (2001), p. 386. and Bartlett/Ghoshal (1987). p.9 [Article 11].

[7] Bartlett/Ghoshal (1987). p.10 [Article 11].

[8] Bartlett/Ghoshal (1998). p. 182ff.

[9] Bartlett/Ghoshal (1987). p.47 [Article 12].

[10] Bartlett/Ghoshal (1998). p. 183-185.

[11] Bartlett/Ghoshal (1998). p. 187-188.

[12] Bartlett/Ghoshal (1998). p. 189-201.

Excerpt out of 10 pages


Transnational Organization - Solution for the Multi National Cooperation?
Mälardalen University  (Institution of Economics)
International Business
Catalog Number
ISBN (eBook)
File size
394 KB
Transnational, Organization, Solution, Multi, National, Cooperation, International, Business
Quote paper
Manja Ledderhos (Author), 2002, Transnational Organization - Solution for the Multi National Cooperation?, Munich, GRIN Verlag,


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